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A re-visit of support at 1.2664 also has potential to be confirmation of a bearish head & shoulders top formation that could complete sometime in the future around 1.05. That would be too sharp a move on purely technical grounds, and it’s worth noting that economic developments coming out of Canada have been balanced and tepid at best.

USD/CAD could nonetheless move south on cues from the US – in particular a slowdown in U.S. Retail Sales heightening concerns about a weak economic recovery. The FOMC Minutes will still be designed to keep us guessing on August 17, but note that markets have adopted a ‘make hay while the sun shines’ approach and will probably react in a meaningful way only in the event of an actual rate rise being announced. Anything else and it’s business as usual.

Markets know what the Fed’s game is, so that San Francisco Governor Williams talking about the limitations of central bank policy has been almost exactly balanced by New York Governor Dudley’s words later in the day, which alluded to rate hike fear and how raising rates is merely a sign of economic health. Both moved the Dollar, negligibly, in their own little way for a small amount of time.

We still think the Fed hasn’t got the room to tighten policy. It doesn’t need to – the Euro and GBP are doing that job for it.

Augustin Eden 
Research Analyst
Accendo Markets

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